MLJ Volume 36-1.pdf - Robson Hall Faculty of Law

388 MANITOBA LAW JOURNAL|VOLUME 36 ISSUE 1
security interest will have priority over every other security interest in the
collateral granted by that debtor. 20 The reason for this reversal of the
general priority rule 21 is that the PMSI is a new asset, in which the reversal
of priority is not damaging to the interest of the all present and afteracquired
property security interest holder.
This rationale is based on three assumptions. First, if the all present
and after-acquired property security interest holder had lent the money,
there would have been no need for the PMSI holder to extend credit.
Therefore, this opens further credit options for the debtor.
Second, rather than damaging the interest of the holder of the all
present and after-acquired property security interest, the new asset subject
to a PMSI increases the size of the total pool of assets available to both the
debtor (in good times), and to the secured creditors (in the event of
default by the debtor). If the particular transaction at issue does not have
this effect of increasing the pool of assets available in this sense, it will not
be considered a PMSI. 22
Third, since the all present and after-acquired property security
interest would rank directly behind any PMSI holder with respect to the
collateral subject to the PMSI, 23 each payment made with respect to the
collateral subject to the PMSI would leave more collateral for the all
present and after-acquired property security interest holder, 24 or at the very
least should leave no less collateral for the all present and after-acquired
property security interest holder. 25
to the collateral prior to possession being acquired by the debtor. “Inventory” is
defined in the PPSA. PPSA, ibid, s 1, sv “inventory”.
20
Ibid, s 34(2).
21
Ibid, s 35(1).
22
On this point, see e.g. Wheatland Industries (1990) Ltd v Baschuk (1994), 127 Sask R
178 at paras 15-16, 8 PPSAC (2d) 247 (Sask QB), per Justice Gerein, as he was then
was.
23
It is quite clear that many concepts under the PPSA, including priority, are
determined on each individual piece of collateral, not the global asset base of the
debtor.
24
This is true in the sense that with each payment made with respect to the asset that is
subject to the PMSI, the amount owing to the holder of the PMSI is reduced, and the
debtor’s equity in that asset is concomitantly increased, thereby increasing the security
of the all present and after-acquired property security interest holder.
25
Even if the value of the asset that is subject to a PMSI decreases more quickly than the
payments that being made to repay the creditor, the fact remains that without the